As a college professor I have a natural interest in the marketing of higher education. From where I stand, I believe industry marketing practices are in a deteriorating condition and slipping far away from a sustainable position.

To be clear, I am not talking about the institution of higher education. That is another subject entirely. What I am addressing is the marketing of higher education.

In marketing management courses we teach the importance of understanding the situation before we devise programs to grow our firm's share, improve its margin, or take the necessary action to fashion a product that will provide sustainable growth and competitive advantage.

Further, we know that products are goods, services or a combination of both, and so too is the case in higher ed. As an academic, I can affirm that I do not feel good about "marketing" my work in the classroom as a "product". Teaching is a much more symbiotic experience in which the recipient of the product becomes a part of the product. However, we will suspend that discussion for another day.

The reality of the environmentOne of the first things we conduct to help us understand the business situation in any industry is a SWOT analysis that forces a critical discussion of the realities of the internal situation (Strengths, Weaknesses) and external environment (Opportunities, Threats). One glaring realization about higher education is painfully obvious: there is too much capacity in higher ed for the available demand. Witness the disintegration of thousands of students options in the recent spate of for-profit closures and consolidations.

As is often the case in shrinking markets, the participants become a bit destructive in their quest of their goals. Skirmishes break out between categories (not-for-profits vs. for-profits), between competitive sets (private colleges vs. public colleges), and even between fields of study (liberal arts vs. STEM vs. business). This is competition breaking through and it can be productive as it becomes a survival of the fittest, so to speak, causing a general jockeying for position that all too often defaults to price.

Now would be a good time to tell you about my experience in radio. Back in the 90s I owned some radio stations. It was a time when the FCC had expanded the dial to include many more competitors. This seemed to have had a deleterious effect when the focus of selling turned from extolling the benefits unique to radio and to specific radio stations to a focus on the shortcomings of competitors thereby zapping the value that radio brings to the picture. A friend of mine opined at the time, "this has us fighting over the table scraps while TV is feasting on the main course."

I believe the marketing of higher ed is in a similar position today.

The iconic business strategist Michael Porter characterizes business strategy as the pursuit of sustainably superior profit performance in the face of competition. What he is saying is that we should focus on value creation. Counter-intuitively, it is NOT about being the best. That is, what he calls, a race to the bottom. In hyper-competitive environments, like the radio business in the 90s, beating the competitor became the focus leading to profit-zapping practices like discounting. Private 4-year colleges and university are taking only 54 cents for every dollar they receive down from 63 cents a dozen years ago.

Yet, I'd bet most college admissions officers will tell you they are really working on value-creation! They would tell you that they are holding firm on price and do not negotiate! Hmm. Sounds like the radio business in the 90s when sales managers said, "we hold firm to the rate card!"

The entire college admissions game is broken. The metrics that leadership reads are deceiving. Consider this fact. "For the fall 2013 admission cycle, 32 percent of freshmen submitted seven or more applications" (Hoover, 2015). What this means is that the yield rate—the number of accepted students who actually enroll—has dropped from 48.7% in 2002 to 35.9% in 2013. This masks the reality that there are fewer actual undergrad prospects. The demand is shrinking. Yet, with all those apps it appears their are so many.

In real estate, we'd call this a buyer's market. Real estate agents rely on "days of supply" as a marker of demand. It is a pretty clear indicator of the inventory available. Lots of inventory, more negotiating power for buyers.

In higher ed, there seems to be a plethora of choices and a shrinking supply of customers, at least in the undergraduate market. In such circumstances prices generally fall. How do you win in this circumstance? The short answer is to sharply define your market offering and narrowly target the customer who seeks this value. Then, do not deviate from your optimal price.

A measure of success here is when an institution routinely wins a head-to-head battle for a recruit sought by both institutions as a prime recruit. This will be reflected in low acceptance rates, in other words an increase selectivity.

If this sounds a but murky, well, you're not alone. The prize goes to the institution that can generate a large number of apps, then focus like a lazer on the students that fit thier value proposition so well that they will pa a premium to enroll. Think Notre Dame, Syracuse Newhouse, or the quintessential Harvard. I will tell you that each time one of those institutions/programs faces a rival they win five-to-one or more. And, price is not part of the equation.

Quick analysis would tell you that if you have a higher number of apps coming from fewer actual applicants, then the ideal situation is to admit the right number of students for the right reasons—no more, no less. Again, the short answer is to focus on fit. Prospects enroll because it is the place for them not because they received a greater discount. If it is the latter, you are leaking profits and that is not the goal.

The challenge is to deliver the precise kind of experience the student and his/her payer expects. The payer may be parents, guardians, the government, and yes, the student. If the product—measured by reputation and built on performance—is the default choice then it is incumbent on the admissions people to hold firm on price. Period.

I can tell you as an owner and buyer of radio time in the 90s, those reps who came to me with a keen understanding of the value of their product and firm grip on its price were those who captured the value they created. What's more, for every true targeted customer who refused to pay the price for what they truly wanted, didn't do so for long.

The undergraduate student cohort is highly susceptible to the buzz they hear from previous classes and what they pass on to ensuing classes of prospects. Be firm. The value-creating reputation will grow as rapidly as the value-zapping reputation that flows from needless discounting.

What we are seeing is a feeding frenzy anchored to a recruiting game whose players are spiraling out of control with demands on the institutional resources (money, people) with diminishing effect. It seems that the best way to recruit prospective students stems from what is happening in the classrooms and hallways as expressed in the relationship between students and professors. If you truly want to win in the long run focus your faculty on what they do best.

Higher ed marketing is a complicated ecosystem. This kind of environment provides many great opportunities for value-creation. But, it requires discipline. We will visit some of these possibilities over the next few posts. However, I am pretty sure that there will be few takers because such frame-breaking moves are most often considered too risky.

See ya' 'round campus.

TIM

Hoover, E. (2015) Three key findings about college. Chronicle of Higher Education web site. Retrieved May 8, 2015 form http://chronicle.com/article/3-Key-Findings-About-College/229983/. The net effect here is that fewer accepted students commit.